POST AWARD CONTRACT MANAGEMENT - FinanceKYs and... · POST AWARD CONTRACT MANAGEMENT •Overview of...

POST AWARD

CONTRACT

MANAGEMENT

POST AWARD CONTRACT MANAGEMENT

• Overview of Types of Contracts and Award Methods

• Understanding the Contract– Contents of the Contract

• Contract Performance– Designating an agency contract manager, receiving

goods or services, monitoring performance, approving payment, evaluation of performance

• Contract Modifications

• Performance Problems, Complaints, and Resolution– Contract Termination

– Disciplinary Action

• Creating and Maintaining Records

• Assignment of Contract or Assignment of Payments

WHAT IS CONTRACT MANAGEMENT?

The management of all actions, after the award of a contract, that must be taken to assure compliance with the contract; e.g., timely delivery, acceptance, payment, closing contract, etc.

Every agency should designate a programmatic contract manager for each contract they administer.

CONTRACT TYPES AND AWARD METHODS

• Competitive Sealed Bidding – KRS 45A.080

• Competitive Negotiation – KRS 45A.085

• Noncompetitive Negotiation – KRS 45A.095

• Small Purchase by state agencies – KRS 45A.100

• Personal Service Contract – KRS 45A.695

• Memorandum of Agreement – KRS 45A.690

***Includes any kind of contract- one-time, Delivery Orders, Master Agreements, PSCs, MOAs

****A payment for a good or service cannot be made without the proper authority!!!

CONTRACT TYPES AND AWARD METHODS

The “contract” will be the official

notice of award, which will begin

the process of contract

management. The vendor must

receive an official contract/order

from the Commonwealth that

authorizes the purchase or

notifies them to begin work.

Understanding the Contract

• Contents of a Contract

– Contract components and order of precedence• Solicitation, addenda to solicitation, vendor’s response

to the solicitation

– Contract Sections• Line items and pricing

• Scope of work/Specifications

• Deliverables and payment triggers

• Negotiated items (where applicable)

• Contract amount and budget

• Contract period and renewals

• Standard Terms and Conditions

Contract Performance

• Awards of state contracts are made in accordance with the evaluation criteria set forth in the solicitation.

• In many instances vendors are awarded points based on their delivery of a product or contract milestones, which may have resulted in their receipt of the award.

• It is essential that the contract manager verifies that the contractor complies with all contractual requirements.


• What should be considered in managing a contractor’s performance?

– Deliverables (milestones)– Quantity of goods to be delivered and/or

services to be performed– Meets required specifications– Schedule

• Completion of project and implementation

– Outcomes• Were the savings projected from using this new

product or service achieved.

– Budget/financial issues• Timeliness of invoicing

• Necessity of contract modifications

– Customer service level


Who manages the contract?

• Commonwealth Buyer from the contract-issuing agency– Point of contact for all communications related to the

contractual terms and conditions.• Renewals, change orders, modifications, or terminations must

all come through the Buyer to be valid and enforceable.

• Using agency designated contract manager

– An employee from the program agency responsible for the performance to be achieved through the contract

– Responsible for enforcing performance of the contract terms and conditions and serve as a liaison with the contractor.


As a Contract Manager, How Do I Monitor Performance?

• Communicate initially with the vendor to set expectations and cover the four basic elements of contract performance

– Contract requirements• Scope of work, deliverables

– Schedule• Milestones, completion

– Budget• Contract delivered within original budget. Accuracy, adequacy and

timeliness of invoices, invoice processing and payment. Financial reporting if required.

– Customer service level • What level of support and access are you going to expect?

• Reiterate these requirements throughout the life of the contract


How Do I Monitor Performance (cont.)?

• Review invoices for contract compliance

– Only approve if product/service billed has been delivered per contract

– In deliverables based contracts, make sure that milestones have been fully met before remitting payment.

– Ensure invoice detail is sufficient for a proper audit.

• For a personal service contract, invoices must be submitted as required by statute, KRS 45A.695(10).


The contractor must be held accountable to

perform at acceptable levels. The quality of

work, work schedule/timetable, conflicts,

budgets, payments, data, and subcontractors

are just a few of the things that should be

monitored.

Acceptance and rejection requirements should

be clearly outlined in the contract. If the

contractor has met the obligations, final

acceptance/payment should follow.

Contract PerformancePayments (per FAP 111-45-00)

• An agency

– shall ensure that adequate funds are available for immediate payment before placing an order

– shall select the appropriate payment method

– shall reference the appropriate contract when making payments in the state’s procurement/ accounting system

– shall process an electronic invoice that will liquidate the encumbrance when payment is authorized, for payments against a document that has been entered into, and has encumbered funds within the state’s procurement/accounting system

– shall retain the official invoice from the vendor for the period of time required by the appropriate document retention schedule

Contract PerformancePayments (cont.)

• An agency may make payments using a Procurement Card– if exercising small purchase authority

– if specifically authorized in the terms of the contract

• All bills shall be paid within thirty (30) working days of receipt of goods and services or a vendor's invoice and acceptance.

• Per KRS 45.454 Penalty for late payment– An interest penalty of 1% per month after thirty (30) working

days following the receipt of the goods or services or vendor's invoice by a purchasing agency.


THE BUCK STOPS HERE!!

The contract manager is the agency’s

front line resource to ensure proper

performance and that we are paying for

what was required in the contract.

CONTRACT

MODIFICATIONS

TYPES OF CONTRACT MODIFICATIONS

Contract modifications are generally one of two types:

• Administrative modifications– Example - change in source of funding

– Changes which do not affect the terms related to vendor performance

• Substantive modifications– Example – Changes in scope, quantity, etc.

– These changes do affect the vendor and therefore require their approval.

CONTRACT MODIFICATIONS

Contract Modifications are governed by statutes,

regulations, and policies and procedures:

• KRS 45A.201(1) Issuance of regulations

concerning modification and termination of

contracts by Commonwealth

• 200 KAR 5:311 Contract modifications

• FAP 111-11-00 Modification of Contracts


• A Modification shall be used to make

corrections or changes to a contract.

• A Modification shall not be used to initiate a

major change outside the original scope of

the contract.

• For Finance issued contracts, a modification

shall not be permitted unless issued by the

Finance Cabinet.

– Agency or vendor can request modification with

supporting documentation.


• An increase in quantity of goods in excess of ten

(10) percent shall not be permitted unless

authorized in the Solicitation, and

• Unit price increases shall not be permitted except

as authorized by the solicitation.

• A Modification shall not be used to increase the

dollar amount of a contract established under an

agency’s small purchase authority to an amount

exceeding the small purchase authority limit.


• Modification to a Personal Service

Contract shall be processed in the same

manner as the original contract in the

state’s procurement system.

– agree to increase or decrease funds,

– revise the scope of work,

– extend the time for performance within the

current biennium, or

– any other change.


• All contract modifications are amendments to contracts and thus become part of the contract.

• All contract modifications must be executed by the buyer or purchasing officer.

• Using agencies may make requests for modifications to the buyer.

• EO1 modification must be made if the originally approved dollar amount is exceeded by more than 15%.


• Contract modifications should be

within the scope of the solicitation

and the existing contract

–Must be consistent with the

procurement method

DEALING WITH

PERFORMANCE

INCLUDING PROBLEMS,

COMPLAINTS &

RESOLUTION

PERFORMANCE BONDS

KRS 45A.190 Performance bond and payment bond

• A performance bond and a payment bond shall be

required for construction contracts > $40,000

• A performance bond may be required

–when any contract in an amount in excess of forty

thousand dollars ($40,000) for commodities,

supplies, equipment, or services of any kind

–when a contract for construction services costing

forty thousand dollars ($40,000) or less is

proposed.

• The requirement shall be included in the solicitation.

PERFORMANCE BONDS

• The agency contract administrator shall

make audits of the performance of contracts

upon completion of one-third (1/3) of the

contract and upon completion of two-thirds

(2/3) of the contract.

• For contracts taking longer than one (1) year

to complete, audits of performance shall be

conducted at least annually.

PERFORMANCE BONDS• Before a vendor is released from a performance bond, the

agency contract administrator shall:

–review the audits of performance,

–make a final performance review,

–and determine whether the vendor has fully complied with the

terms of the contract.

• The using agency head shall:

– review the documentation from the contract administrator

– determine whether to recommend to the purchasing agency

that the performance bond be released or whether a claim

should be made against the performance bond.

See also Policies and Procedures: FAP 111-27-00 AND 200 KAR

5:305.

Receipt and Delivery Issues – FAP 111-41-00

• Delivery may be complete or partial

depending on the contract terms.

• Acceptance of late delivery does not waive

the agency’s rights under the contract.

• Agencies should not be specifically charged

for packing materials, crating, containers, etc.

– Vendor may require the return of containers and

provide for a credit so check the terms of the

contract.


Late Delivery

• Penalty for Late Delivery

– Cause for disciplinary action

– Vendor shall be charged in accordance with the terms and conditions of the contract and the cost shall be deemed a debt owed by the vendor to the Commonwealth of Kentucky.

– If it creates a critical situation requiring the commodity to be obtained from some other source.

• The contracting agency may enter the open market and purchase the commodity sought under the contract.

• Vendor may be required to pay the difference in cost.


Freight Claims:

An agency receiver of delivered goods shall:

• note shortages or apparent damages on the delivering carrier's freight bill and obtain the delivering driver's signature

• Concealed damages shall be reported to the delivering carrier within seven (7) calendar days after receipt of delivery.

• If a vendor fails to handle a freight claim or repair or replace damaged materials promptly, the agency shall file an official Performance Evaluation (PE) Document with the Office of Procurement Services.

HANDLING PROBLEMS

Agency Contract manager to discuss problems

– In person or by telephone (document dates

and names) or email with vendor contact

– In person or by telephone (document dates

and names) or email with vendor

management

– By letter

– Notify the purchasing officer of problems and

corrective action, or if no resolution. In some

agencies, the purchasing officer may be the

person to conduct the meeting.

AGENCY RESPONSIBILITY

Purchasing officer

– Contact vendor management, seek agreement on resolution.

– Follow up in writing, ranging from email to letter to formal Vendor Complaint.

– Complete a Performance Evaluation in eMARS to document a vendor complaint.

– Apply liquidated damages if applicable, by invoice or by deduction from payments owed.

– If a term contract is involved, state that the correction and compliance with all other contract terms must continue through the balance of the term of the contract.

POLICY FOR VENDOR COMPLAINTS

FAP 111-42-00 VENDOR COMPLAINTS

For minor problems:

• The agency shall contact the vendor directly and attempt to informally resolve the problem.

• If the vendor does not act promptly and satisfactorily, the using agency shall immediately file a Performance Evaluation (PE) Document in eMARS.

• The agency shall then email the appropriate Finance OPS buyer the PE document number.


For major problems:

• The using agency shall immediately file a

Performance Evaluation (PE) Document in eMARS.

• A Performance Evaluation (PE) Document shall fully

document the nature of the problem.

• An agency shall not allow vendor complaints to

accumulate or go unreported until a crisis exists.

• The agency shall then email the appropriate Finance

OPS buyer the PE document number.

• The state agency shall be copied on all

communications between the Office of Procurement

Services and the vendor.


• If persistent or chronic problems with a given vendor are documented, or the vendor fails to respond, the Office of Procurement Services may initiate disciplinary action.

• Per 200 KAR 5:315. Section 2, Any contractor determined to have committed any act prohibited, or to have failed to perform any required act may

– be placed on probation

– suspended from bidding to the Commonwealth of Kentucky, or

– a combination of suspension from bidding and probation, for not more than twelve (12) months –twenty-four (24) months.

REGULATION FOR DISCIPLINARY ACTION

Disciplinary action for failure to perform

• Failure to post bid or performance bonds, as required by a solicitation;

• Substitution of commodities;

• Failure to comply with the terms and conditions of a solicitation or contract,

– including failure to complete performance within the time specified in the contract;

• Failure to replace inferior or defective materials, supplies or equipment


• Refusal to accept a contract awarded pursuant

to the terms of a solicitation

• Falsifying invoices, or making false

representations to any state agency or official,

about any payment under a contract

• Collusion

• Failure to report, or to pay the Kentucky

Department of Revenue any sales or use taxes

• Failure to comply with the prevailing wage law

requirements


• No purchase shall be made by any state

agency from a bidder or contractor who has

been suspended from bidding.

• All state agencies shall be promptly informed

about bidders or contractors suspended from

bidding.

CONTRACT

TERMINATION

200 KAR 5:312. TERMINATION OF CONTRACTS

Any contractor who is determined to be in breach

of any of the terms and conditions of a contract

with the Commonwealth of Kentucky, shall be

declared in default and the contract may be

terminated.

Contracts may be terminated for:

– default by the contractor

– the convenience of the Commonwealth,

– non-appropriation of funds

200 KAR 5:312. Termination for Default

The Commonwealth may terminate a contract because of the contractor’s failure to perform its contractual duties.

This can include:

– Failure to perform the contract according to its terms, conditions and specifications;

– Failure to make delivery within the time specified;

– Late payment or nonpayment of bills for labor, materials, supplies, or equipment furnished in connection with a contract for construction services;

– Failure to diligently advance the work under a contract for construction services;

– The filing of a bankruptcy petition by or against the contractor; or

– Actions that endanger the health, safety or welfare of the Commonwealth or its citizens.

200 KAR 5:312. Termination for Default

The Commonwealth shall not be liable for

any further payment to a contractor

under a contract terminated for the

contractor's default after the date of

termination.

200 KAR 5:312. Termination for Convenience

The Commonwealth may terminate a contract for

convenience if it has been determined that termination will

be in the Commonwealth's best interests.

– The Commonwealth shall provide the contractor thirty (30)

calendar days written notice of termination of the contract.

– the contractor shall have the burden of establishing the

amount of compensation to which the contractor believes he

is entitled.

– the purchasing officer may negotiate a settlement with the

contractor according to terms deemed just and equitable by

the purchasing agency.

– the settlement shall be subject to the prior approval of the

Secretary of the Finance and Administration Cabinet, or

designee.

200 KAR 5:312. Termination for Convenience

Payment

– Payment of the sum agreed to in settlement

of a contract terminated for convenience of

the Commonwealth shall be made from the

same source of funds or account as the

original contract.

– The Commonwealth shall not pay interest on

the amount due under the settlement.

200 KAR 5:312. Funding Out Provision

The Commonwealth may terminate a contract if

funds are not appropriated to the contracting

agency or are not otherwise available for the

purpose of making payments without incurring

any obligation for payment after the date of

termination, regardless of the terms of the

contract.

The contracting agency shall provide the

contractor thirty (30) calendar days written

notice of termination of the contract.

REQUESTS FOR

ASSIGNMENT TO

ALTERNATE PAYEE OR

SUCCESSOR

ASSIGNMENTS

TWO DIFFERENT ISSUES:

1. Assignment of the payment

2. Assignment of the contract to a

successor firm

FAP 120-08-07

ASSIGNMENT OF BENEFITS

• A vendor wishing to assign part or all of the proceeds of a contract shall submit to the Finance and Administration Cabinet’s Division of Statewide Accounting Services a notarized assignment form.

• An approved assignment shall apply to all future contracts that are renewals of the original contract assigned and shall be effective until the original contract and any renewals expire or are terminated, or until a subsequent assignment of the contract proceeds is approved.

ASSIGNMENTS

• Assignment of the Contract: A contract issued

by the Office of Procurement Services is not

assignable except with the prior written

approval and contract modification by OPS.

• Assignment of the Payment: Monies which

become due hereunder are not assignable

except with the prior written approval of the

director of the Division of Statewide Accounting

Services.

ASSIGNMENTS

• Assignment of the Payment or the Contract: the terms and conditions shall apply to and bind the party to whom the Contract is assigned as fully and completely as the Contractor is bound and obligated.

• No assignment, if any, shall operate to

release the Contractor from its liability for the

prompt and effective performance of its

obligations under the Contract.

Documentation

WHAT SHOULD BE KEPT?

A contract manager’s file

should contain the contract,

any amendments, and all

reports, complaints, and

correspondence materially

related to the contract.

DOCUMENT, DOCUMENT, DOCUMENT!

It is impossible to overstate the importance of documenting activity during the life of the contract!

It is critical in the resolution of disputes or claims! Any staff who deals with the vendor should maintain records of contract activity, and note problems or unusual occurrences.

You will rely heavily on the documentation to deal with protests and legal disputes, answer open record requests, handle vendor complaints/cancel contracts for failure to perform, etc.

WHAT SHOULD I DOCUMENT?

Regardless of how small or insignificant the

matter may seem, problems tend to snowball

and can get out of hand. You should:

– keep copies of written correspondence and e-

mails with the vendor

– document telephone conversations with the

vendor (date, time, vendor representative’s

name)

– briefly document meetings with vendor

representatives

RETENTION OF PROCUREMENT DOCUMENTS

Files and Records – General

• Each agency shall maintain records

necessary to support each purchasing

transaction.

• See FAP 111-28-00 for additional

information.

Wrap - Up

TAKE-AWAYS

• Read and Understand the Contract

• Communicate

• Measure outputs and performance

regularly

• Be mindful of timeframes

• Remember your responsibility and

expectations

• Document, Document, Document!

GET AHEAD

For next contract:

• First rule: PLAN AHEAD FOR

THE NEXT CONTRACTING

PROCESS.

• Second rule: PLAN AHEAD FOR

THE NEXT CONTRACTING

PROCESS.

QUESTIONS

?

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